March/April 2011
Scrap and related companies are investing in alternative energy projects to reduce their electricity costs, greenhouse gas emissions, and demand on the power grid. With government and utility company incentives, such projects are more affordable than ever, they say.
By Chelan David
When you ask scrap processors and related businesses why they’ve invested in alternative energy generation, their reasons tend to fall into two categories: carrot and stick. For some, the carrots, or incentives, start with the fundamental belief that clean energy is the wave of the future, but they’re quick to tout more immediate benefits as well: reduced energy costs for what can be an energy-intensive business, for example, and tax incentives, grants, loans, and other payments they can get from government agencies or utility companies. The stick, in the form of taxes, penalties, and other disincentives, are coming from those same governments and utilities, which in some parts of the country are mandating a greater use of alternative energy or reductions in greenhouse gas emissions.
Whether they were persuaded by the carrot, the stick, or a little bit of each, the following four companies have taken the leap and installed solar, wind, and fuel-cell electricity generation equipment at their facilities. The companies say they’re pleased with the projects’ performance so far. And one additional benefit, they say, has been the positive public relations the installations have generated, which has positioned them as responsible, forward-thinking corporate citizens.
Solar Energy in the Wolverine State
Louis Padnos Iron & Metal Co. (Holland, Mich.) is always on the lookout for new green energy options, says Jeff Padnos, president of this 105-year-old, third-generation family scrap company, which has yards in 12 locations throughout western and central Michigan. “We’ve always been interested in anything that makes economic or environmental sense—ideally, both.”
In 2008 and 2009, several forces combined to make a strong business case for the company’s investment in solar energy at its Wyoming, Mich., facility, which processes paper and plastics. First, Michigan passed a law that requires the state’s public utilities to get 10 percent of their energy supply from renewable sources by 2015. Then Consumers Energy (Jackson, Mich.), Padnos’ utility supplier, created an incentive to encourage its residential and commercial customers to install solar panels—not to make the customers self-sufficient, but so they can generate energy and sell it back to the utility. The Experimental Advanced Renewable Program, Consumers Energy’s name for its kilowatt-buyback program, pays participants a set fee—well above market rates for electricity at the time the program began—for each kilowatt-hour the customer generates over the length of the contract. Padnos also took advantage of federal alternative energy tax credits, which covered 30 percent of the project’s costs, and state property tax breaks for alternative energy installations.
The company hired Renewable Energy Solutions (Chelsea, Mich.), a subsidiary of Cascade Engineering (Grand Rapids, Mich.), to design and install what’s now the state’s largest solar power array. The choice of firm was not difficult, Jeff Padnos says: The company has a business relationship with Cascade founder and CEO Fred Keller and his family that dates back more than 50 years, when Jeff’s father, Stuart, helped Keller’s father obtain steel and other scarce scrap metals in the months after World War II. With just a handshake, Padnos and Keller launched the $1.2 million deal, and Renewable Energy Solutions delivered. The project “came in on budget, and there were no complications. They did a very good job of engineering—everything came in the way they said it would,” Padnos says.
The Wyoming, Mich., facility now has 636 solar panels arrayed across 15,000 square feet of the building’s roof. The 3-foot by 5-foot solar panels—supplied by Sharp Electronics Corp. (Mahwah, N.J.), with photovoltaic cells built in Japan and assembled in Tennessee—are rated to withstand 1-inch hail at 135 miles per hour and winds up to 120 mph—crucial standards, given western Michigan’s blustery winters. In fact, the first day the company tested the system, in December 2009, was perhaps the worst day of that winter, Padnos recalls, with stinging wind and drifting snow.
Though solar power might seem an odd choice of alternative energy supply from such a harsh, cold climate, Michael Ford, president and general manager of Renewable Energy Solutions, says photovoltaics work better in cooler weather. In fact, weather patterns were a factor in the decision to use solar energy versus other clean-energy options for this project. “You have to look at historical studies of how much the sun shines, how strong the wind blows, and what other things you have near where you are,” Padnos says.
A special website, solar.padnos.com, provides real-time data on the project, including the amount of energy it’s generating at any moment, the current environmental conditions, and historical data by day, month, year, and over the length of the project. The more hours of daylight, the more electricity the panels generate, ranging from a high of nearly 24,000 kilowatt-hours in July 2010 to a low of just 849 kwh this past January. From the project’s launch in January 2010 to mid-February 2011, the system has generated nearly 190,000 kwh of electricity—enough to power 16 houses for one year, though only a fraction of the company’s total electricity needs. So far, Padnos says, the project has “exceeded expectations” in the volume of electricity it generates, reaching 110 percent of the projected amount in the 2010 calendar year. “We need that cushion,” Padnos says, “because for January 2011, a combination of gray days and ice and sleet coating our panels resulted in us producing less than 15 percent” of projected amounts.
In addition to producing electricity, the project has generated some other benefits. The ribbon-cutting ceremony attracted positive press coverage, as did a visit from Sen. Carl Levin (D-Mich.), who went up on the roof to inspect the panels in November. The solar array even has generated interest from prospective employees, Padnos says.
The company has a 12-year contract to sell Consumers Energy the power the solar panels generate at the preferred rate. After that point, the company has the option to use the panels to meet some of its own electricity needs or perhaps enter into a new contract to supply the grid. “The social and environmental benefits played a big role in this decision” to invest in solar power, Padnos says. “Even with the tax credit and the above-market sale of electricity back to the power company, the payback will require far longer than most investments we would make”—up to 12 years, he estimates. He expects the technology to improve and costs to come down in the future, however. If it makes economic sense, he says, he’s open to additional solar projects. The company has plenty more space on this and other facility roofs.
Tapping the Sun in Southern California
SA Recycling (Anaheim, Calif.) operates more than 40 processing facilities in California, Arizona, and Nevada, and among them are four automobile shredders that range in size from 5,000 hp to 9,000 hp. With the enormous cost of supplying electricity to these machines, the company has pursued cost-saving and energy-saving measures for nearly a decade. It operates the shredders only at off-peak hours, for example, and it installed a substation at its Anaheim headquarters facility to purchase power at a higher voltage. One more investment the company expects will lower its energy costs and produce other long-term benefits is its December 2009 installation of a nearly 2-acre array of solar panels on the Anaheim facility’s roof.
The 72,000-square-foot photovoltaic canopy has the capacity to generate about half a megawatt (501 kw) of electricity, making the company the city’s largest generator of solar power. “It may not generate all the power we need, but it will certainly go a long way toward lessening our reliance on the power grid, which in turn will free up a significant amount of electricity for other commercial users and consumers,” says Jeff Farano Jr., SA Recycling’s special projects director. What’s more, he says, “as good environmental stewards, we thought it was the right thing to do.”
DRI Energy (Irvine, Calif.) designed and built the project, which consists of 2,505 panels manufactured by Suntech (San Francisco) that it installed facing south and tilted at a 5-degree angle. Installation took three months and came in on budget, at about $2.5 million. Offsetting some of the expense were federal tax credits for 30 percent of installation costs, state tax credits, accelerated depreciation on the equipment, and the Anaheim Public Utilities Solar Incentive Program, which pays the company 39 cents for each kilowatt-hour of electricity it generates in its first five years. On average, the solar panels produce about 56,000 kw of electricity per month; thus, the project has the potential to generate more than $260,000 in incentive payments a year or $1.3 million over the length of the five-year program. All told, “the system will allow SA to save $60,000 a year on utility costs, and all money saved is being donated to local Anaheim charities,” Farano says.
The system has exceeded expectations, providing 107 percent of the electricity the company expected to generate, Farano reports. That’s not enough to run a shredder, but it covers the entire electricity use of the Anaheim facility’s business offices and maintenance department. Another benefit is that it generates clean energy, with no greenhouse gas emissions, reducing SA Recycling’s carbon footprint and further cementing the company’s environmental commitment. Since its inception, Farano says, the system has helped eliminate nearly 600,000 pounds of carbon dioxide, 159 pounds of nitrogen oxides, and 30 pounds of sulfur dioxide emissions.
For other scrapyards considering solar energy, Farano has this advice: “Work closely with local agencies and energy companies to utilize all available incentives. Pick a solar company that is experienced in not only the installation and operation of solar, but also in the available incentives.”
Making Clean Energy a Breeze
Motorists zipping down Interstate 480 in Cleveland can’t miss a 140-foot wind turbine that towers over the roadway near the Pearl Road overpass. That turbine belongs to Pearl Road Auto Parts, an auto salvage yard with a view of a clean-energy future for itself and other companies.
Pearl Road made the move to alternative energy for several reasons, explains Jon Kaplan, vice president and fourth-generation leader of this 84-year-old family company. It’s good for the environment, it reduces the company’s carbon footprint, and—most important—the ROI calculation was attractive. He expects the investment to pay for itself in just five years. “Most mature alternative energy sources are a good idea if you can accept a three- to eight-year payback,” Kaplan asserts. The long-term return for “investing in your own business and generating your own electricity” looks even better, he adds. After all, “electric rates will only go up.”
The turbine makes the company’s energy expenses more predictable, points out Stefanie Penn Spear, executive director of EcoWatch (Cleveland), who worked with Kaplan on the project. “With electricity costs on the rise from utility companies, it is hard for businesses to calculate what their electricity costs will be in the years to come,” she says. With your own alternative energy installation, you know exactly what your per-kilowatt-hour cost is.
Kaplan says he first contemplated using wind as a power source back in 1992, when his father noted the near-constant presence of wind at the facility. Back then, however, there were no state or federal grants and no tax credits to support such innovation. The availability of government assistance is what finally made the wind turbine project a reality. Because nearly 90 percent of Ohio’s electricity comes from burning coal, the state has made investment in renewable energy a priority. For its wind turbine project, Pearl Road secured a $147,000 grant from the Ohio Department of Development’s Advanced Energy Fund (Columbus, Ohio) and took advantage of a 30-percent federal grant in lieu of a tax credit and accelerated depreciation on the equipment. In all, federal and state funding covered 73 percent of the $350,000 project cost.
Kaplan took the lead on the project, from design to procurement to installation. That installation was relatively quick: Foundation excavation and cement pouring and curing took one month; then in one day, workers erected the turbine—a remanufactured, Danish-built Vestas V-20 purchased from Halus Power Systems (San Leandro, Calif.). After a few more days of electrical work, the 120-kw turbine was up and running. The installation provided “green” jobs for 12 northeast Ohio companies that had never before done wind projects, Spear notes, among them an engineering firm, construction contractor, steel fabricator, and electrical contractor.
The only complication, Kaplan says, was the utility company. Unlike the solar installations at Padnos and SA Recycling, which had the support of their local utilities, for the Cleveland Electric Illuminating Co. (Brecksville, Ohio), “it was their first [turbine], and they acted like it was competition,” he says. Ohio’s public utility commission guarantees such projects a net-metering agreement: The electric company must pay an agreed-upon price for the excess electricity the project generates and supplies back to the grid. “In Ohio, each month is tallied, and at the end of the year any excess is paid for by the utility,” he says. That deal was Cleveland Electric’s first with a private, commercial-scale turbine, but it’s probably not the last. Ohio’s renewable energy portfolio standard mandates that utilities get 12.5 percent of their electricity from renewable sources by 2025.
Construction of the turbine was complete in early December 2009. It took a few starts and stops to connect it to the meter and work out some fluctuations in the electrical grid, Kaplan says. When conditions stabilized, in January 2010, it began operating at 100-percent power, and it has not shut down since. It has the capacity to generate between 90,000 kwh and 120,000 kwh of electricity a year, depending on wind speed. In its first 14 months it has produced more than 100,000 kwh, Kaplan says, which has been enough to cover 80 percent of the needs of the 4.7-acre facility, which dismantles about 4,000 cars a year. (The yard’s largest piece of equipment—its car crusher—runs on diesel fuel.) “The ultimate goal, when you are producing your own electricity, is to only produce what you need so the electricity you produce is worth the most money,” Kaplan explains. “Any extra power produced is bought back by the utility at a lower cost, [so] sizing a turbine bigger than your needs lowers your return on investment.”
The appearance of the 140-foot wind turbine naturally garnered significant attention from the community. When it was first erected, Kaplan says, he received e-mails every day asking when the company would turn it on. His neighbors even tweeted about it. The feedback he has received since the turbine began spinning has been favorable. “We installed Christmas lights [on it] last year” to wide community acclaim, he says.
Before a scrapyard invests in alternative energy, it should get guidance from a consultant or installation company that can perform a feasibility study to determine the best project for the site, Spear advises. Such a study can examine a facility’s electricity use to determine what size system it needs, then provide several potential project options so that the company can decide what kind of financial investment it wants to make to result in what amount of electricity. “The feasibility study should include all costs associated with the life of the project,” she adds. With the experience, knowledge, and relationships he developed while installing his wind turbine, Kaplan launched his own alternative energy firm, PearlWind (Beachwood, Ohio), to design, engineer, and install wind, solar, and induction lighting solutions.
Like SA’s Farano, Spear urges companies to take advantage of all available incentives at the local, state, and federal levels, such as the 30 per-cent federal tax credit. “Investment in renewable energy projects like solar and wind can have a relatively short return on investment depending on the incentives available.” She recommends the Database of State Incentives for Renewables and Efficiency (www.dsireusa.org) as a good place to start.
The Potential of Ultra-Clean Fuel Cells
Secondary aluminum smelter TST had one primary goal in mind when it began investigating alternative energy in 2005: No emissions. The company’s Fontana, Calif., facility is within the Los Angeles metropolitan area, which is notorious for its smog. Even though the region continues to top lists of most-polluted cities, its air quality has improved over the past decade, due in part to tight state and regional emission standards that were set to get even tighter.
“In 2006, California passed Assem-bly Bill 32—the Global Warming Solu-tions Act—that committed California to reducing CO2 emissions to 1990 levels by 2020,” says Bruce Pohlman, a project manager with Alliance Power (Littleton, Colo.), which worked with TST to implement its clean energy project. “In addition, the TST facility is located in the [South Coast Air Quality Management District], which has the strictest air emission limitations in the United States for criteria pollutants,” which include nitrogen oxides, sulfur oxides, carbon monoxide, and particulates. Facing these restrictions as well as rising electricity costs, TST came up with an innovative solution: It’s using fuel cells to generate nearly emissions-free electricity.
In the simplest terms, a fuel cell is an electrochemical device that generates electricity efficiently, silently, and without combustion. Inside the cell, hydrogen fuel (which it obtains from a supply of natural gas) combines with oxygen (from the air) to produce electricity, heat, and water. The chemical reaction is comparable to what happens inside a battery, but the fuel cell will never run out of power so long as it’s continuously fed with hydrogen and oxygen. Though the natural gas the process requires is still a fossil fuel, it’s relatively abundant in the United States, and its use in fuel cells produces almost no greenhouse gas emissions.
Fuel cells were a good fit for TST due to several characteristics of their electricity-producing process. First, the chemical reaction generates heat as well as electricity, making it ideal for operations that can use this cogeneration. “In a secondary aluminum plant, we have a lot of need for heat,” says TST CEO Andrew Stein. The company uses the 650-degree-F heat from the fuel cells’ exhaust to replace a natural-gas-fired burner that heated the smelter’s exhaust as part of the plant’s emissions control system.
“The other issue was being able to operate 24 hours a day, seven days a week, because it takes a fuel cell about eight hours to come up to full power from a cold start,” Stein says. “If you’re running a facility that shuts down at night, it wouldn’t be cost-effective.” TST meets that requirement with its continuous operations.
With those considerations in mind, fuel cells seemed the “greenest” way to generate the electricity TST needed when it launched its search for an alternative energy project. To generate the same amount of electricity via solar power would have required “too many rooftops,” Stein says, and wind power is not continuous. TST and other smelters still had questions about fuel cells’ suitability for their operations, however. “Metalworking facilities are some of California’s largest electricity consumers,” noted James Simonelli, executive director of the California Cast Metals Association (El Dorado Hills, Calif.), in TST’s announcement of the project. “Ultra-clean, on-site generation is very attractive to our members when balancing the need for consistent, cost-effective power and a clean source for that electricity on our sites.” In 2006, TST agreed to install the technology as a demonstration project for the California Metals Coalition (Sacramento, Calif.). It was an opportunity “to prove that this next-generation technology could provide power to a facility that’s got a fluctuating load [as well as] a lot of electric motors—not a traditional application for a fuel cell at the time,” Stein says.
Alliance Power and FuelCell Energy (Danbury, Conn.) formed a joint venture to sell electric power and provide recovered thermal energy to the TST facility. FuelCell Energy manufactured the direct fuel cell power plant, which consists of two carbonate fuel cells, and it operates and maintains the plant. Alliance Power was the turnkey provider for the project, responsible for project management, obtaining funding, and connecting the fuel cell plant to the necessary infrastructure. TST agreed to purchase the electricity the plant generates for five years. (There is no additional charge for the thermal energy.) The companies agreed to design and install the plant within one year. On-site work included the construction of concrete equipment pads, the installation of underground piping for natural gas and water, and 480-volt electrical service. Construction began in April 2006 and took four months. The plant required minimal space, about 40 feet by 40 feet, Stein says.
The fuel cell plant has the capacity to continually produce 500 kw of electricity, or 4 million kwh a year. It’s designed to operate for at least 25 years with routine maintenance and replacement of the fuel cell stacks—the sets of individual fuel cells inside each larger cell. When first installed, the plant met 75 percent of TST’s energy needs; five years down the road, with one of the fuel cells already restacked and the other awaiting a stack, it’s down to about 25 percent. Stein expects it to reach that 75-percent level again once the restacking takes place, and the company will continue purchasing electricity from the plant at the end of the five-year contract. At the same time as the fuel cell project, TST installed four 60-kw microturbines, which use natural gas combustion to generate both electricity and heat in a process that’s more efficient and produces fewer emissions than a traditional power plant. The microturbines also cogenerate heat that TST uses for emissions control.
Although the entire project—the two fuel cells and four microturbines—cost about $3 million, TST had to cover only some fairly minor facility costs. Outside funding included $1.25 million from the Self-Generation Incentive Program of the California Public Utility Commission (San Francisco), which encourages electrical customers to install distributed generation that operates on renewable fuel or contributes to system reliability; $500,000 from SCAQMD; and another grant from the U.S. Army Corps of Engineers’ Engineer Research and Development Center-Construction Engineering Research Laboratory (Champaign, Ill.).
Though TST’s electricity bills are “slightly” lower than they were before installing the fuel cells, the advantages of green energy cannot be expressed in dollars and cents and kilowatt-hours alone. “There’s a great social benefit,” Stein says. By replacing electricity from the local power plant with that from the fuel cells, and by using the cogenerated heat instead of a separate natural gas burner for the smelter emissions system, TST’s Fontana facility cut its emissions by up to 260 pounds of nitrogen oxides and 540 pounds of carbon dioxide annually. “There are a lot of environmental benefits, and it’s nice to be the site hosting something that’s so state-of-the-art and yet provides the basic needs of the facility,” Stein says. “We’ve gotten a lot of good publicity about it.”
Chelan David is a writer based in Overland Park, Kan. Theodore Fischer, a writer based in Silver Spring, Md., and Rachel H. Pollack, editor of Scrap, also contributed to the story.
Scrap and related companies are investing in alternative energy projects to reduce their electricity costs, greenhouse gas emissions, and demand on the power grid. With government and utility company incentives, such projects are more affordable than ever, they say.